Correlation Between Amplify ETF and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both Amplify ETF and Direxion Daily at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Amplify ETF and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amplify ETF Trust and Direxion Daily Travel, you can compare the effects of market volatilities on Amplify ETF and Direxion Daily and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Amplify ETF with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amplify ETF and Direxion Daily.

Diversification Opportunities for Amplify ETF and Direxion Daily

0.94

Correlation Coefficient

Amplify ETF  Direxion Daily

Almost no diversification

The 3 months correlation between Amplify and Direxion is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Amplify ETF Trust and Direxion Daily Travel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Travel and Amplify ETF is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Amplify ETF Trust are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Travel has no effect on the direction of Amplify ETF i.e., Amplify ETF and Direxion Daily go up and down completely randomly.

Pair Corralation between Amplify ETF and Direxion Daily

Given the investment horizon of 90 days Amplify ETF Trust is expected to generate 0.54 times more return on investment than Direxion Daily. However, Amplify ETF Trust is 1.84 times less risky than Direxion Daily. It trades about -0.02 of its potential returns per unit of risk. Direxion Daily Travel is currently generating about -0.05 per unit of risk. If you would invest  2,189  in Amplify ETF Trust on September 24, 2024 and sell it today you would lose (13.00) from holding Amplify ETF Trust or give up 0.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.24%
Values	Daily Returns

Amplify ETF Trust  vs.  Direxion Daily Travel

Amplify ETF Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amplify ETF Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Amplify ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Direxion Daily Travel

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Travel are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Direxion Daily displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amplify ETF and Direxion Daily

The main advantage of trading using opposite Amplify ETF and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amplify ETF position performs unexpectedly, Direxion Daily can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Direxion Daily will offset losses from the drop in Direxion Daily's long position.

The idea behind Amplify ETF Trust and Direxion Daily Travel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.